Technology Watch

Innovation and technological disruption in Africa

Large and robust negative effects of robots on employment and wages are expected in most of the world, but is of particular interest for African countries positioning themselves to harness the power of the so-called Fourth Industrial Revolution (FIR).

This a conclusion from a new study by two Massachusetts Institute of Technology (MIT) researchers, Daron Acemoglu and Pascual Restrepo.

In contrast to a 2016 study, which concluded that automation lowers the cost of production compared to using labour, Satyajit Das argues that the world economy has reached “peak technology” – the economic benefits of technology is projected to reach 95% by 2038.

Anxiety

Economic historians describe automation as probably the technological revolution evoking the most social anxiety.

Concern over the impact of automation is likely to be acute in regions such as Africa where youth unemployment remains a major threat to political stability.

The specter of economic populism that is haunting Europe and America is partly rooted in perceptions of unemployment and inequality arising from how businesses deployed technology in the last few decades. Africa will not be spared from the sweep of such populism.

People don’t resist technologies simply because they are new. They resist those embedded in business models that lead to loss of livelihoods, identity, meaning, or sense of purpose.

Technology and the embedded business models are more likely to be accepted if they promote shared benefits and economic inclusion, but face opposition if they are perceived to lead to loss of livelihoods, identity, personal health safety, community relations, and connections to the environment. Of these, livelihoods are often the primary trigger for concern.

M-Pesa and Uber

Two African examples illustrate this point and allude to ways to promote economic inclusion.

The first is the iconic adoption of mobile phones and the derivative mobile money transfer services such as M-Pesa, which has gone global. The second is the controversies surrounding the adoption of Uber, especially in Kenya and South Africa.

Mobile phones were initially considered a threat to state-owned land line monopolies. State officials showed early widespread objections to their introduction. Some feared the loss of state revenue, while others were concerned about the erosion of state power, especially over surveillance.

Yet, mobile phones were adopted readily in Kenya, facilitated by an inclusive business model, involving access to low-cost handsets, prepayment approach, and providing new business opportunities for venders. The introduction of mobile money transfer services expanded businesses through the creation of transaction kiosks across the country.

Mobile technology started as a service but ended up becoming the infrastructure upon which new businesses such as M-Pesa were founded. It inspired variants around the world. The industry, especially through smartphones, has become a hotbed for creativity and a source of inspiration for young innovators and entrepreneurs.

Uber tells a different story. The initial perception was of instant disruption. Taxi drivers in Kenya have at times responded by physically attacking Uber drivers. For them the loss of livelihoods was real and immediate.

The way forward for Uber entails searching for technological inclusion. There are several possibilities, like seeking ways to share the market through joint ventures.

Such compromises are not new. Café au lait was invented to reduce business tensions between coffee and milk traders.

Such an approach is not usually favoured by those pursuing a winner-take-all business model, but does foster inclusion and promote technology adoption.

Another option is to promote greater competition using similar technologies. New local entrants are emerging in Kenya and South Africa, though experiencing an uphill battle, competing with the well-established Uber brand.

Access to new technologies might hold the key to such inclusion. Kenya’s Safaricom, for example, has launched Little Cab using its strong mobile technology base to compete with Uber.

South Africa, having been slow to adopt mobile money technology, is finding it harder to compete. Striking taxi drivers have called on the government to restrict Uber’s operations.

Finally, helping riders and drivers to overcome their constraints, promotes inclusion. When Uber realized that Kenyans were reluctant to pay using their bank accounts, it allowed cash payment. Uber also helps drivers in Kenya, South Africa and Nigeria to acquire their own cars.

Other approaches include new app-based rider services. South Africa VW, for example, has launched such a service in Rwanda. South Africa VW plans to expand its service to Kenya and other African countries.

Importance of inclusion

The of mobile phone and Uber examples underscore the importance of inclusion in promoting adoption of new technologies.

It is often argued that new technologies do not only destroy jobs, but also create new ones. This is historically true, and will continue to happen. But with automation, it is important to note three key differences between historical trends, especially those during England’s Industrial Revolution wo centuries ago, and contemporary developments:

First, robots and automation will rapidly invade every conceivable human activity, its spread a global phenomenon. No region of world will be able isolate itself from its diffusion.

Countries like China which built their industrial base on cheap labour are at the forefront of adopting industrial robots.

Second, the pace of technological change is discernibly exponential, disruptions often occurring soon after new technologies are introduced. Uber is less than a decade old, but its tumultuous entry is already being felt worldwide.

More disruptions are expected in the sector, especially through the introduction of driverless cars.

Third, that displaced workers can be retrained for new tasks no longer holds universally true. Robots are learning new tasks faster than we can train old workers. We are entering the age where robots will make other robots faster than humans can reproduce themselves.

The key to inclusion might be broader access to the same disruptive technologies.

Of particular importance is access to emerging technologies through engineering education and open technology platforms expanding Africa’s opportunities to create new businesses. This shared future will make resistance to innovation a less attractive option.